Caution State Law Variances!
SECTION 303. PROTECTED-SERIES TRANSFERABLE INTEREST.
(a) A protected-series transferable interest of a protected series of a series limited liability company must be owned initially by an associated member of the protected series or the company.
Reporter's Comment to Subsection (a) – A protected-series transferable interest can be owned initially only by an associated member or the series limited liability company. Cf. Uniform Limited Liability Company Act (2006) (Last Amended 2013), Section 102(24) (defining "[t]ransferable interest" as "the right, as initially owned by a person in the person's capacity as a member, to receive distributions from a limited liability company") (emphasis added). Subsection (a) is not variable, Section 107(a)(13), but does not restrict an initial owner's rights to transfer. The operating agreement should delineate those rights. If it does not, Sections 106(c) and 108 delineate the rights by extrapolation. See Section 106(d), cmt.
JayNote: The (necessarily) stilted verbiage of this section 303 probably makes interpreting it a lot harder than technically the section may actually be.
Subsection (a) basically says no more than that if there is an interest in a protected series which is transferable, i.e., the member/owner of that interest can sell or gift it to someone, then that interest must first be owned by an associated member of that protected series, i.e., the transferee cannot be the first owner of the interest.
This is where you have to go back to basic LLC law and recall that a transferee of an interest does not ipso facto become a member, but instead only becomes the owner of what amounts to the economic rights in the interest, i.e., the right to distributions, etc.
(b) If a protected series of a series limited liability company has no associated members when established, the company owns the protected-series transferable interests in the protected series.
Reporter's Comment to Subsection (b) – This provision is non-variable, Section 107(a)(13).
JayNote: Subsection (b) basically says that if, at the time the protected series is created, there are no members which are associated with it, the series organization itself owner the protected series.
(c) In addition to acquiring a protected series transferable series interest under subsection (b), a series limited liability company may acquire a series transferable interest through a transfer from another person or as provided in the operating agreement.
JayNote: Subsection (c) states that the series organization can always receive a transferable interest in a protected series from somebody else, whether that interest is received through some sort of assignment or other transaction, or is received through the mechanics of the Operating Agreement, i.e., "the Associated Members of Series THX-1138 shall cause their transferable interests to be assigned to the Company no later than October 1, 2032".
(d) Except for Section 108(a)(3), a provision of this ACT which applies to a protected-series transferee of a protected series of a series limited liability company applies to the company in its capacity as an owner of a protected-series transferable interest of the protected series. A provision of the operating agreement of a series limited liability company which applies to a protected-series transferee of a protected series of the company applies to the company in its capacity as an owner of a protected-series transferable interest of the protected series.
Reporter's Comment to Subsection (d) – By definition, this act does not permit a series limited liability company to be an associated member of any of the protected series of the company. See Section 302(a) ("Only a member of a series limited liability company may be an associated member of a protected series of the company."). In consequence, when a company acquires a series transferable interest it obtains no governance rights in the protected series except as provided in the operating agreement or under Subsection 304(b) (providing as a default rule that whenever a protected series has no associated members, the company is the series manager).
When a series limited liability company owns a protected-series transferable interest of a protected series of the company, the company's rights are identical to the rights of a protected-series transferee of the protected series with only one exception. The exception is Section 304(b), which makes the company the protected-series manager of any protected series that has no associated members.
The Drafting Committee discussed omitting this subsection in favor of expanding the definition of "protected-series transferee" to include the company. That approach is consistent with "[a] protected series of a series limited liability company [being] a person distinct from … the company," Section 103(1), but nonetheless seems counterintuitive (somewhat like a snake swallowing its own tail). To avoid potential confusion, the Committee chose the approach stated in this subsection.
JayNote: Subsection (d) basically says that if a series organization owns an interest in a protected series, then as to that protected series, the series organization must play by the rules as if it were any other member of the protected series.
ARTICLE 1. GENERAL PROVISIONS
SECTION 101. SHORT TITLE. SECTION 102. DEFINITIONS. SECTION 103. NATURE OF PROTECTED SERIES. SECTION 104. POWERS AND DURATION OF PROTECTED SERIES. SECTION 105. GOVERNING LAW. SECTION 106. RELATION OF OPERATING AGREEMENT, THIS ACT, AND LIMITED LIABILITY COMPANY ACT. SECTION 107. ADDITIONAL LIMITATIONS ON OPERATING AGREEMENT. SECTION 108. RULES FOR APPLYING LIMITED LIABILITY COMPANY ACT TO SPECIFIED PROVISIONS OF ACT.
ARTICLE 2. ESTABLISHING PROTECTED SERIES
SECTION 201. PROTECTED SERIES DESIGNATION; AMENDMENT. SECTION 202. NAME. SECTION 203. REGISTERED AGENT. SECTION 204. SERVICE OF PROCESS, NOTICE, DEMAND, OR OTHER RECORD. SECTION 205. CERTIFICATE OF GOOD STANDING FOR PROTECTED SERIES. SECTION 206. INFORMATION REQUIRED IN ANNUAL BIENNIAL REPORT; EFFECT OF FAILURE TO PROVIDE.
ARTICLE 3. ASSOCIATED ASSET; ASSOCIATED MEMBER; PROTECTED-SERIES TRANSFERABLE INTEREST; MANAGEMENT; RIGHT OF INFORMATION
SECTION 301. ASSOCIATED ASSET. SECTION 302. ASSOCIATED MEMBER. SECTION 303. PROTECTED-SERIES TRANSFERABLE INTEREST. SECTION 304. MANAGEMENT. SECTION 305. RIGHT OF PERSON NOT ASSOCIATED MEMBER OF PROTECTED SERIES TO INFORMATION CONCERNING PROTECTED SERIES.
ARTICLE 4. LIMITATION ON LIABILITY AND ENFORCEMENT OF CLAIMS
SECTION 401. LIMITATIONS ON LIABILITY. SECTION 402. CLAIM SEEKING TO DISREGARD LIMITATION OF LIABILITY. SECTION 403. REMEDIES OF JUDGMENT CREDITOR OF ASSOCIATED MEMBER OR PROTECTED-SERIES TRANSFEREE. SECTION 404. ENFORCEMENT AGAINST NON-ASSOCIATED ASSET.
ARTICLE 5. DISSOLUTION AND WINDING UP OF PROTECTED SERIES
SECTION 501. EVENTS CAUSING DISSOLUTION OF PROTECTED SERIES. SECTION 502. WINDING UP DISSOLVED PROTECTED SERIES. SECTION 503. EFFECT OF REINSTATEMENT OF SERIES LIMITED LIABILITY COMPANY OR REVOCATION OF VOLUNTARY DISSOLUTION.
ARTICLE 6. ENTITY TRANSACTIONS RESTRICTED
SECTION 601. DEFINITIONS. SECTION 602. PROTECTED SERIES MAY NOT BE PARTY TO ENTITY TRANSACTION. SECTION 603. RESTRICTION ON ENTITY TRANSACTION INVOLVING PROTECTED SERIES. SECTION 604. MERGER AUTHORIZED; PARTIES RESTRICTED. SECTION 605. PLAN OF MERGER. SECTION 606. STATEMENT OF MERGER. SECTION 607. EFFECT OF MERGER. SECTION 608. APPLICATION OF SECTION 404 AFTER MERGER.
ARTICLE 7. FOREIGN PROTECTED SERIES
SECTION 701. GOVERNING LAW. SECTION 702. NO ATTRIBUTION OF ACTIVITIES CONSTITUTING DOING BUSINESS OR FOR ESTABLISHING JURISDICTION. SECTION 703. REGISTRATION OF FOREIGN PROTECTED SERIES. SECTION 704. DISCLOSURE REQUIRED WHEN FOREIGN SERIES LIMITED LIABILITY COMPANY OR FOREIGN PROTECTED SERIES PARTY TO PROCEEDING.
ARTICLE 8. MISCELLANEOUS PROVISIONS
SECTION 801. UNIFORMITY OF APPLICATION AND CONSTRUCTION. SECTION 802. RELATION TO ELECTRONIC SIGNATURES IN GLOBAL AND NATIONAL COMMERCE ACT. SECTION 803. TRANSITIONAL PROVISIONS. SECTION 804. SAVINGS CLAUSE. SECTION 805. SEVERABILITY CLAUSE. SECTION 806. REPEALS; CONFORMING AMENDMENTS. SECTION 807. EFFECTIVE DATE.
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Protected Series Agreements and Forms -- A list of the "best practices" agreements and records that all protected series structures should have.
UPSA COURT OPINIONS
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NON-UPSA COURT OPINIONS
191212 ... Ohio ... Delaware Act .. MSP Recovery Claims, Series LLC v. Phoenix Ins. Co., 2019 WL 6770981 (N.D. Ohio, 2019).
181019 ... Florida ... Delaware Act ... MRP Recovery Claims, Series LLC v. USAA General Indemnity Co., 2018 WL 5112998 (S.D.Fla., Oct. 19, 2018).
2020.03.17 ... Series LLC Not Allowed To Play Pea-Shell Game In City Of Urbana Opinion
2020.02.16 ... Talisman Casualty Denied Diversity Jurisdiction Of Protected Cell Series LLC In National WW II Museum Case
2019.01.28 ... Understanding The Protected Series Act: Article 8 And Final Thoughts
2018.11.24 ... Understanding The Protected Series Act: Treating Out-Of-State Series
2018.11.18 ... Understanding The Protected Series Act: Mergers
2018.10.29 ... Understanding The Protected Series Act: Dissolution And Winding Up Of Protected Series
2018.10.21 ... Understanding The Protected Series Act: Liability Limitations And Claims
2018.08.30 ... Understanding The Protected Series Act: Assets, Members And Management
2018.08.28 ... Understanding The Protected Series Act: Creating A Protected Series And Service Of Process
2018.07.18 ... Understanding The Protected Series Act: The Framework of UPSA - Part 2 of a Series
2018.06.18 ... Understanding The Protected Series Act: What Is A Protected Series?
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